United States of America v. $98,723.00 U.S. Currency

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
LAREDO DIVISION
UNITED STATES OF AMERICA
v.
$98,723.00 U.S. CURRENCY
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Civil No. 5:24-CV-00034
REPORT AND RECOMMENDATION
The Government’s Motion for Default Judgment and Entry of Final Order of Forfeiture,
Dkt. No. 19, was referred to the undersigned for a Report and Recommendation pursuant to
28 U.S.C. § 636(b)(1). Dkt. No. 20. For the following reasons, the undersigned respectfully
RECOMMENDS that the Government’s Motion for Default Judgment and Entry of Final Order
of Forfeiture, Dkt. No. 19, be GRANTED.
Background
The Government filed a complaint against Defendant Currency on February 13, 2024. Dkt.
No. 1. The verification in the original complaint averred that “the facts stated in paragraphs 7–9”
were supported by information known to the Special Agent. Id. at 6. However, as the District
Court noted, the factual allegations in paragraph six (6) of the original complaint accounted for
$29,910.00 of Defendant Currency and were without verification. Dkt. No. 12 at 1. Moreover,
the Government did not file notice that they had notified Ruben Velasco-Hermosillo, when he was
likely a known potential claimant given that more than one-third of Defendant Currency was
recovered from his safe. Id. at 8. The District Court denied the Government’s original Motion for
Default Judgment, Dkt. No. 11, for failing to certify the facts in paragraph six and failure to
United States District Court
Southern District of Texas
ENTERED
March 23, 2026
Nathan Ochsner, Clerk
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properly serve Ruben Velasco-Hermosillo, a known potential claimant of Defendant Currency.
Dkt. No. 12. The Government filed an amended complaint against Defendant Currency on
February 10, 2025. Dkt. No. 13. The verification of the amended complaint avers that “the facts
stated in paragraphs 6–9” are supported by information gleaned by the Special Agent. Id. at 6.
The Government argues that the amended complaint sets out sufficiently detailed and properly
verified facts to justify forfeiture of Defendant Currency, and that all known potential claimants,
including Mr. Velasco-Hermosillo, were properly and directly noticed. Dkt. No. 19 at 1, 3.
On June 23, 2023, Houston Police Department Officer Seth Gillham stopped Kristofer
Velasco for a traffic violation. Dkt. No. 13 at ¶ 6. During the traffic stop, law enforcement officers
discovered $29,910.00 in United States currency inside Mr. Velasco’s Chevrolet Malibu in a plastic
shopping bag. Id. Mr. Velasco subsequently admitted to Drug Enforcement Administration (DEA)
Special Agent Shelby Hamilton and Houston Police Officer Jerrod John Louis that he had
delivered a kilogram of cocaine in exchange for the money found in his car. Id. at ¶ 7. Mr. “Velasco
admitted to having more cocaine at his residence and gave verbal consent for DEA Agents and
Task Force Officers to search his residence on Grand Prairie Street, Houston, Texas.” Id. During
the resulting search of Mr. Velasco’s residence, law enforcement agents recovered numerous illegal
narcotics, along with $28,823.00 in United States currency, which was found in a bag containing
cocaine in Mr. Velasco’s bedroom. Id. at ¶ 8. Agents recovered an additional $39,990.00 in a safe
inside Ruben Velasco-Hermosillo’s, Mr. Velasco’s father’s, room. Id. Mr. Velasco-Hermosillo
informed the agents that some of the currency found in the safe was given to him by Mr. Velasco.
Id. “The combined amount of seized United States currency is $98,723.” Id. at ¶ 9.
A warrant for Defendant Currency was executed on March 25, 2024. Dkt. No. 6. After
filing the amended complaint on February 10, 2025, the Government directly served all known
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potential claimants notice of this suit. Dkt. No. 15. Additionally, the Government posted notice
of the civil forfeiture to the official government site from March 12, 2025, through April 10, 2025.
Dkt. No. 16 at 2. Seeing no timely claim by any claimant, the Government requested an entry of
default on August 7, 2025, Dkt. No. 17, and the Clerk of Court entered default against Defendant
Currency on August 26, 2025. Dkt. No. 18. The Government subsequently moved for default
judgment against Defendant Currency. Dkt. No. 19.
Legal Standards
The Government must comply with all relevant procedural requirements in seeking default
judgment in an asset forfeiture. United States v. $11,409.02, No. 4:21-CV-01349, 2021 WL
5177065 (S.D. Tex. Nov. 8, 2021). The procedural requirements are found in Federal Rule of Civil
Procedure 55 and Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset
Forfeiture Actions (“Rule G”). In addition to procedural compliance, the Government’s Complaint
must establish a valid cause of action. United States v. $19,840.00, 552 F. Supp. 2d 632 (W.D.
Tex. 2008). Default judgment must be appropriate under the Lindsey factors. United States v.
$11,409.02, 2021 WL 5177065, at *2–3 (citing Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir.
1998)). And, if default judgment is appropriate, the Court must determine “what form of relief, if
any, the Government should receive,” United States v. $19,840, 552 F. Supp. 2d at 635 (citing
Nishimatsu Const. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)), and confirm
that the default judgment does not exceed nor differ from what is demanded in the complaint. Fed.
R. Civ. P. 54(c).
A. Procedural Requirements
The Government has complied with the relevant procedural requirements found in Federal
Rule of Civil Procedure 55 and Rule G of the Supplemental Rules for Admiralty or Maritime
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Claims and Asset Forfeiture Actions (“Rule G”). Rule 55 contains three steps for default
judgments. When a defendant, or “claimant” in a forfeiture posture, fails to respond or otherwise
defend against a lawsuit, they “default.” Fed. R. Civ. P. 55(a). Once the plaintiff proves that failure
through an affidavit or otherwise, the clerk of court enters the claimant’s default, called “entry of
default.” Id. After default is entered, the plaintiff may move for default judgment. Fed. R. Civ. P.
55(b)(2).
In asset forfeiture cases, the Government must comply with the pleading and notice
requirements of Rule G. United States v. $62,200.00 in U.S. Currency, Civ. No. H-21-3971, 2023
WL 2386884, at *1 (S.D. Tex. Mar. 6, 2023) (citing In re Ramu Corp., 903 F.2d 312, 317 n.7 (5th
Cir. 1990)). For pleadings, the Government’s complaint must:
(a) be verified;
(b) state the grounds for subject-matter jurisdiction, in rem jurisdiction over the
defendant property, and venue;
(c) describe the property with reasonable particularity;
(d) if the property is tangible, state its location when any seizure occurred and—if
different—its location when the action is filed;
(e) identify the statute under which the forfeiture action is brought; and
(f) state sufficiently detailed facts to support a reasonable belief that the government
will be able to meet its burden of proof at trial.
Fed. R. Civ. P. G(2).
The undersigned finds that the Government effectively cured the verification of the
complaint by ensuring that the signing Special Agent averred the facts in paragraphs six through
nine (6–9) of the amended complaint. Dkt. No. 13 at 6. The Government properly stated the
grounds for this court’s jurisdiction pursuant to 28 U.S.C. §§ 1345 and 1355 and venue pursuant
to 28 U.S.C. §§ 1355, 1391(b), and 1395(a)–(b). Dkt. No. 13 at 1. Defendant Currency was
described with reasonable particularity because the Government provided “specific information
about the date and location of the seizure, the amount of money seized, and the [potential
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claimants’] actions on the date of the seizure.” United States v. $109,086.00 United States
Currency, No. Civ. A. H-04-3727, 2005 WL 1923613 at *4 (S.D. Tex. Aug. 10, 2005) (quoting
United States v. Funds in the Amount of $29,266.00, 96 F. Supp. 2d 806, 810 (N.D. Ill. 2000)); see
Dkt. No. 13 at ¶¶ 6–9. The Government stated that Defendant Currency is subject to forfeiture
under 21 U.S.C. § 881(a)(6), which provides for the forfeiture of funds procured in exchange for
illegal narcotics in violation of the Controlled Substances Act, 21 U.S.C. § 801, et seq. Dkt. No.
13 at ¶ 5. Moreover, the undersigned finds that the Government has stated sufficiently detailed
facts to support a reasonable belief that it would be able to meet its burden of proof at trial. Thus,
the undersigned finds that the Government’s amended complaint has complied with the pleading
requirements of Rule G.
Rule G requires the Government to provide notice to potential claimants of seized currency
of the forfeiture action in several ways. Within a reasonable time, the Government must publish
notice of the forfeiture on the Government’s forfeiture website, and the notice must appear for at
least 30 consecutive days. Rule G(4)(a)(iii)(A), (4)(a)(iv)(C). The Government must also directly
notify “any person who reasonably appears to be a potential claimant[.]” Rule G(4)(b)(i). Directly
notified potential claimants must file a claim within 35 days of receiving notice. Rule G(4)(b)(ii).
Other potential claimants must file their claims within 60 days of the first day the Government
published notice on its website. Rule G(5)(a)(ii)(B).
The Government filed sufficient proof that “[n]otice of Civil Forfeiture was posted on an
official government internet site (www.forfeiture.gov) for at least 30 consecutive days, beginning
on March 12, 2025, and ending on April 10, 2025, as required by Rule G(4)(a)(iv)(C) . . . .” Dkt.
No. 16 at 2. Additionally, the Government filed proof that any known potential claimants,
including Kristofer Velasco, Ruben Velasco-Hermosillo, Adriana Jones, and Howard Miller et al.
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were served notice of the instant suit directly. Dkt. No. 15. Notably, the Government successfully
filed proof that Mr. Ruben Velasco-Hermosillo was directly served with the amended complaint.
Id. at 12–13. Neither Mr. Ruben Velasco-Hermosillo nor any other party has filed a claim to date.
Accordingly, the undersigned finds that the Government has complied with its notice requirements
under Rule G.
To respond or defend in a forfeiture action, a potential claimant must (1) file a claim for
the property and (2) answer or file a Rule 12 motion. Rule G(5)(a)(i), G(5)(b). Despite adequate
notice from the Government, no claimant has completed either task. Dkt. Nos. 15, 16. The
Government obtained entry of default. Dkt. No. 18. The Government has now properly moved
for default judgment. Dkt. No. 19.
B. Valid Cause of Action
Beyond procedure, the Government must establish a valid cause of action, here a valid
forfeiture. United States v. $19,840, 552 F. Supp. 2d at 635. The Government’s cause of action is
21 U.S.C. § 881(a)(6), providing for the forfeiture of all monies exchanged or intended to be
exchanged for a controlled substance in violation of 21 U.S.C. § 801, et seq., all proceeds traceable
to an exchange, and all monies used or intended to be used to facilitate a violation of § 801. Dkt.
No. 13 at ¶ 5. Because the Government is claiming that the property was used in a criminal offense
or was involved in the commission of one, it must prove there was a substantial connection
between Defendant Currency and the alleged offense. 18 U.S.C. § 983(c)(3). The Government’s
burden of proof is a preponderance of the evidence. § 983(c)(1). Additionally, when a claimant
fails to respond, the Government’s allegations are assumed to be true. See Nishimatsu, 515 F.2d
at 1206.
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Because no claimant has responded in this case, the undersigned assumes the Government’s
allegations to be true. Accordingly, the undersigned finds that Mr. Velasco admitted that the
$29,910.00 seized from his vehicle were the direct proceeds of a narcotics sale. Dkt. No. 13 at ¶ 7.
The $28,823.00 recovered from Mr. Velasco’s bedroom was found in a bag containing cocaine.
Id. at ¶ 8. Thus, agents reasonably believed that there was a substantial connection between this
currency and illegal narcotics trafficking. See United States v. $38,600.00 in United States
Currency, 784 F.2d 694, 698 (5th Cir. 1986) (superseded on other grounds) (“[A] large amount of
money, found in combination with other persuasive circumstantial evidence, particularly the
presence of drug paraphernalia, is frequently held sufficient to establish probable cause.”).
The substantial connection between the currency found in Mr. Velasco’s father’s safe and
the alleged offense is less immediately clear. However, in forfeiture actions in rem in which the
subject property is cash, “any identical property found in the same place or account as the property
involved in the offense that is the basis for the forfeiture” is also subject to forfeiture. 18 U.S.C.
§ 984(a)(2). Here, Mr. Velasco’s father informed agents that some of the money in his safe was
given to him by Mr. Velasco, who had previously admitted to being a narcotics courier. Dkt. No.
13 at ¶ 8. Therefore, agents reasonably believed that some of the cash in the safe constituted
proceeds from Velasco’s narcotics trafficking enterprise. The undersigned finds that this
reasonable belief constitutes a sufficient nexus between the money in the safe and the criminal
offense under 18 U.S.C. § 984(a)(2).
C. The Lindsey Factors
In addition to being procedurally proper and there being a valid cause of action, default
judgment must be proper considering the Lindsey factors. United States v. $11,409.02, 2021 WL
5177065, at *2–3 (citing Lindsey, 161 F.3d at 893). The factors are:
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(1) whether material issues of fact are in dispute; (2) whether there has been
substantial prejudice to the plaintiff; (3) whether the grounds for default are clearly
established; (4) whether the default was caused by a good-faith mistake or
excusable neglect on the defendant’s part; (5) whether default judgment is
inappropriately harsh under the circumstances; and (6) whether the court would
think itself obliged to set aside the default upon motion by the defendant.
Id. (cleaned up). None of the factors favor denying default judgment. Thus, default judgment is
proper.
D. Form of Relief
Finally, the Government requests appropriate relief. See United States v. $19,840, 552 F.
Supp. 2d at 635 (citing Nishimatsu, 515 F.2d at 1206). Given the facts alleged by the Government
and the relevant law, forfeiture of Defendant Currency is appropriate. Additionally, the request to
forfeit $98,723.00 is the same relief as requested from the amended complaint, Dkt. No. 13,
satisfying Rule 54(c).
Conclusion
For the foregoing reasons, the undersigned respectfully requests that the District Court
ACCEPT the findings in this report and RECOMMENDS that the Government’s Motion for
Default Judgment, Dkt. No. 19, be GRANTED.
Warnings
The parties may file objections to this Report and Recommendation, unless they waive the
right to do so. A party filing objections must specifically identify those findings or
recommendations to which objections are being made. The District Court need not consider
frivolous, conclusive, or general objections. Battle v. U.S. Parole Comm’n, 834 F.2d 419, 421 (5th
Cir. 1987) (quoting Nettles v. Wainwright, 677 F.2d 404, 410 n.8 (5th Cir. 1982) (en banc)).
A party’s failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after being served with a copy of the Report—
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or the party’s waiver of the right to do so—shall bar that party from de novo review by the District
Court of the proposed findings and recommendations and, except upon grounds of plain error, shall
bar the party from appellate review of proposed factual findings and legal conclusions accepted by
the District Court to which no objections were filed. See 28 U.S.C. § 636(b)(1); Thomas v. Arn,
474 U.S. 140, 150–53 (1985); Douglass v. United Services Auto. Ass’n, 79 F.3d 1415, 1428–29
(5th Cir. 1996) (en banc).
Signed this March 20, 2026, in Laredo, Texas.
______________________________
Diana Song Quiroga
United States Magistrate Judge
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